One of the most unpleasant conversations an attorney has to have with heirs today revolves around the “Step-Up” in property taxes. Since the implementation of California’s Proposition 19, the ability for children to inherit their parents’ low property tax base has been severely restricted. What was once a simple transfer is now a complex financial calculation.
As a probate real estate specialist, I see how this financial shock often forces a sale that heirs weren’t planning for. Understanding the new law is crucial for an executor’s fiduciary duty.
The New Reality for Heirs and the Tax Burden
Under the previous law (Prop 58/193), children could inherit the low property tax base of their parents regardless of whether they lived in the home. Now, unless the heir moves into the family home as their primary residence within one year and the difference between the inherited value and the new market value is less than $1 million, the property is fully reassessed at current market value.
For a home bought in the 1980s, which might have an annual tax bill of $2,000, a current market value assessment can lead to an annual bill jumping to $12,000 or more. This sudden, massive increase in carrying costs often makes keeping the home financially untenable.
How We Support Your Firm’s Strategy
When heirs are undecided, the legal case can stall. We provide a Rental vs. Sell Analysis that specifically factors in these new, higher tax rates alongside mortgage payments, insurance, and maintenance costs. By presenting the hard numbers early, we help you expedite the decision-making process. Our goal is to prevent the estate from bleeding cash on a property the heirs ultimately cannot afford to keep. We provide the financial clarity needed to move the legal process forward efficiently.
If your firm has a complex estate requiring property valuation under the new Prop 19 rules, let’s discuss your case. The first consultation is always complimentary, and remember, we offer an integrated Mobile Notary Service for efficient document signing.